IEA will release oil reserves, prices drop
Source: Agencies |
June 24, 2011, Friday
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Print Edition
Print Edition
OIL prices sank more than US$8 to a four-month low yesterday after the world's consumer nations said they would band together to aid the global economy by releasing emergency oil reserves.
Oil prices fell to their lowest since the eruption of Libya's civil war in February stemmed exports from the OPEC member, putting a strain on global oil supplies. The International Energy Agency said it would help ease the strain by releasing 60 million barrels of government-held stocks, immediately increasing global supply by nearly 2.5 percent.
The move shocked traders who had been expecting the IEA to give top exporter Saudi Arabia more time to make up for the supply shortfall following OPEC's failed meeting on June 8, when other members blocked Gulf efforts to hike output.
"I'm surprised. Everyone's saying they've got enough stocks. This should keep WTI (US crude) under US$100, but really we want Brent there, and this should help," said Robert Montefusco, broker at Sucden Financial.
Brent crude futures for August plunged more than US$8, nearly its lowest intraday price since February 22.
US crude lagged the decline but still fell US$5.20 to US$90.21 a barrel, taking prices more than 20 percent below their early May peak at more than US$114, the highest since 2008.
The move came as the oil market fell sharply amid worries over global fuel demand following higher-than-expected US jobless claims, forecasts of lower US growth and evidence of a slowdown in Chinese manufacturing.
"This supply disruption has been under way for some time, and its effect has become more pronounced as it has continued," the IEA said. It said expectations were that Libyan production would remain off the market for the rest of 2011.
"Greater tightness in the oil market threatens to undermine the fragile global economic recovery," it said.
The IEA release, at 2 million barrels per day over the next 30 days, is more than the daily loss of Libya's exports of 1.2 million bpd.
Oil prices fell to their lowest since the eruption of Libya's civil war in February stemmed exports from the OPEC member, putting a strain on global oil supplies. The International Energy Agency said it would help ease the strain by releasing 60 million barrels of government-held stocks, immediately increasing global supply by nearly 2.5 percent.
The move shocked traders who had been expecting the IEA to give top exporter Saudi Arabia more time to make up for the supply shortfall following OPEC's failed meeting on June 8, when other members blocked Gulf efforts to hike output.
"I'm surprised. Everyone's saying they've got enough stocks. This should keep WTI (US crude) under US$100, but really we want Brent there, and this should help," said Robert Montefusco, broker at Sucden Financial.
Brent crude futures for August plunged more than US$8, nearly its lowest intraday price since February 22.
US crude lagged the decline but still fell US$5.20 to US$90.21 a barrel, taking prices more than 20 percent below their early May peak at more than US$114, the highest since 2008.
The move came as the oil market fell sharply amid worries over global fuel demand following higher-than-expected US jobless claims, forecasts of lower US growth and evidence of a slowdown in Chinese manufacturing.
"This supply disruption has been under way for some time, and its effect has become more pronounced as it has continued," the IEA said. It said expectations were that Libyan production would remain off the market for the rest of 2011.
"Greater tightness in the oil market threatens to undermine the fragile global economic recovery," it said.
The IEA release, at 2 million barrels per day over the next 30 days, is more than the daily loss of Libya's exports of 1.2 million bpd.
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